Iraqi Base Oils Still Struggle


DUBAI, United Arab Emirates – Its been nine months since Iraqs central government declared victory over the Islamic State of Iraq and the Levant, or ISIL, but base oil operations in the country have yet to recover. Industry sources say it is too early to say when production could recover from that conflict – and others that preceded it.

Iraq was once one of the Middle East Gulfs major base oil producers, with API Group I plants in Basra, Daura and Baiji, all operated under the national Oil Ministry. But those assets have not operated on all cylinders since at least 2003, when they were disrupted by the Second Gulf War.

Information about the status of operations has been difficult to obtain for most of the intervening decade and a half. That remains the case today, partly because traders operating there are reluctant to share what they consider to be closely-held information.

Saadalla Al-Fathi, former president of the Iraqi Refineries and Gas Administration and currently a non-executive director for Canadian oil company Zenith Energy, told Lube Report this month – after checking with a source – that the plants continue to suffer from damage and lack of upkeep during the years of war and insurgency conflict hat continued almost unabated since 2003.

The two plants in Baiji are probably severely damaged by the war, he said. There are three production lines in Daura, but [they] are not well kept, and the first line is very old. The line in Basra, which is the newest, is I am told under rehabilitation and not working.

There are also quality issues with at least some of the base stocks that are produced, according to Izhan Ahmad, markets editor at ICIS. Products out of Basra refineries were regarded as similar to Group I material [but] some said the base oils had a strong sulfur smell, and viscosity index dropped at higher temperatures, he said.

With the United States reinstituting economic sanctions against Iran, the regions largest producer of Group I base stocks, some observers had expressed hopes that Iraqi oils could help fill any gap caused by disruptions to Iranian base oil exports. But Ahmad and Al-Fathi said there is no evidence that this could happen in the foreseeable future.

As far as I can tell, no one has done or heard of any cargo from Iraq recently, Ahmad said. But Ahmad and Al-Fathi said there is no evidence of any significant recent export activity.

While work is under way to shore up at least some of Iraqs base oil capacity, it must also be noted that security in the country remains uncertain. Residual fears over ISIL and a paralyzing security situation continue to hamper reconstruction efforts. The government declared a state of emergency following recent deadly protests in Basra – site of one plant and a key route for exports when they are happening. Claims of fraud in recent parliamentary elections may presage further instability amid mounting sectarian tensions.

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